ECONOMIC DEMOCRACY

By Rich Florentino

As Supreme Court Justice Louis Brandeis said, during the 1920’s, “We must make our choice. We may have democracy or we may have wealth concentrated in the hands of a few, but we can’t have both.”

 

Photo: Ilya Galak

Photo: Ilya Galak

The Issue

Large corporations and banks have excessive and unwarranted power. Their largely unrestrained, unaccountable actions and influence in so many areas are a fundamental threat to our democracy, our economy and our society.

This state of affairs is behind most of the very serious problems that confront us today. A brief discussion of familiar concerns will illustrate the point. As many of us work on these separate issues, it is hoped that we keep in mind that all our efforts are, in important ways, part of one battle against illegitimate concentrated power; this will make us all stronger as we work on many fronts towards a more just and democratic world.

The influence of large companies is wreaking havoc on the environment: climate change, hydro fracturing, oil pipelines and the destruction of natural areas and the privatization of common, genetic modification of foods, etc…

Drastic income/wealth inequality, increasing poverty, instability and bailouts, our high and persistent unemployment and the increase personal and government debt burdens bear witness to the current economic state of most of us while corporate profits take an ever larger portion of our economic pie and wages stagnate or shrink.

The influence of corporations on women’s choice, health care, gun control, the devaluation of public education and the spread of charter schools, and the incredibly high rates of incarceration threaten the very fabric of our society.

Americans’ loss of belief in the ability of government to represent us has increased as billions are spent on campaigns and lobbying; many regulators are ‘captured’ by the desire to be hired at much higher salaries by the very corporations they are supposed to regulate; TV ‘news’, the ‘free’ press, are part of huge monopolistic corporate empires and no longer independently able to expose systemic crises.

These matters are so pervasive and intractable because they serve the interests of the fantastically wealthy and powerful corporate/financial interests; all outcomes, it seems are pre-ordained to directly increase profits or protect privilege and maintain power of the largest economic entities.

In addition, some issues, especially social and cultural matters (e.g., gun control, abortion) are exacerbated to divide citizens and divert attention and from fundamental, systemic problems in our nation.

Examples

Some specific examples support the case:

– Despite polls showing 90% popular support for background checks for gun purchases, it was defeated largely by the NRA.

– In all elections, 95% of the winners are those with more campaign money.

– Only 200 individuals have provided more than 80% of the Super PAC money in the 2012 election cycle. (U.S. News and World Report, article: “ 196 People Control 80 Percent of Super PAC Money: Who Are They?”, Elizabeth Flock, June 27, 2012)

– A handful of media corporations, Murdoch, Comcast, News Corporation own TV stations reach well over half of the American population.

– Ten billion dollars was spent in 2012 elections at all levels, Federal, state and local, mostly on TV ads and most of them negative.

– Total corporate and bank profits amount to trillions of dollars per year with the majority being under control of a small elite of upper-management and ownership of the largest firms. ($10 billion is a miniscule investment to protect trillions in income.)

– Over the last several decades, the portion of GDP that went to wages has decreased from 55% of the economy to around 45%; in our current $15 trillion economy that amounts to a $1.5 trillion redistribution of income upwards every single year, from wages to profits that are taxed at much lower rates.

– TPP: Trans-Pacific Partnership, 600 corporate representatives are drafting a massive “free” trade agreement, without any transparency, that places corporate profits above any ‘partner’ nation’s laws that restrict trade; this has been referred to “NAFTA on steroids.”

wall street 2

Photo: Ilya Galak

Historical Context:

Even conservative thinkers understood the challenge.

As F.A. Hayek wrote in “The Road to Serfdom”, “Anyone who has observed how aspiring monopolists regularly seek and frequently obtain the assistance of the state … can have little doubt that there is nothing inevitable about this development”, and “planning . . is required to make competition as beneficial as possible.”

Adam Smith, in Wealth of Nations, was in fact railing against the monopolistic organization of the economy implemented under Mercantilism, which was driven by the single aim of increasing the nation’s store of gold. . His serious misgivings regarding “joint-stock” companies (the name for corporations of that day), though often overlooked by the apologists of the present day ‘free’ market economy, are clearly stated and unmistakable: limited liability and the separation of management from ownership were sure to cause “negligence and profusion.”

More progressive thinkers of course have always seen the problems.

Jefferson was an early proponent of a Bill of Rights for our Constitution, and one provision he wrote about frequently was, “Freedom from monopolies in commerce”, as no less important than, freedom of the press, free speech, separation of church and state, trial by jury, habeas corpus in protecting our nascent republic.

As Supreme Court Justice Louis Brandeis said, during the 1920’s, “We must make our choice. We may have democracy or we may have wealth concentrated in the hands of a few, but we can’t have both.”

FDR captured this trade-off between wealth and democracy when he said, in his campaign against Hoover, “I am not for a return to that definition of liberty under which for many years a free people were gradually regimented into the service” of big business.

wall street 3

Photo: Ilya Galak

Recommendations

So, the question becomes, how we restore a “beneficial” competition in both the economic sphere and thereby in the marketplace of ideas which is the essence of democracy. It is imperative that the excess power of our largest economic entities must be reduced or at the very least counterbalanced – but perhaps most effectively – and enduringly – tamed by advancing alternatives to their psuedo-aristocracy.

It is obvious that our current economic and political systems are thoroughly entrenched in our ways of living and, therefore, in our ways of thinking. Any progress toward a more open and competitive economy and a just democracy will take concerted, long-term efforts on many fronts. It is critical that many seemingly disparate efforts, each of great value in their own right, must also be seen as part of the same battle against a concentrated undemocratic power — it is our present-day American Revolution – perhaps Evolution is the more applicable term.

The recommendations fall under three broad categories: regulation of existing structures; modification of existing structures and the support of alternative structures.

a. Regulation:

1) restoration of election oversight; reversal of Citizens United

2) reinstituting Glass-Steagal

3) restructuring of tax code to be more progressive (eliminating “carried interest exemption”; reducing “off-shoring” of corporate profits

4) requiring more disclosure in campaign contributions

5) greater regulation of resolving door (regulators and business)

6) resumption of anti-trust enforcement; especially of media corporations

7) push-back on all “worst” offenses:

– fracking

– poverty level minimum wage rate

– derivatives trading

– privatization of public education, student loans, postal service, corrections systems, money supply

b. Modifications

1) reclaim the rights of states to review corporate charters to reconsider responsibilities along with the privileges of limited liability, perpetual life, ‘personhood’. etc.

2) require employee representation on boards of directors (as in Germany, etc.)

3) increased promotion and incentives for employee-ownership plans (in conjunction with 2) to ensure the control of investments)

4) collective bargaining guarantees as part of corporate charters

5) inclusion of other stakeholders (in addition to employees) in corporate governance, (e.g., local communities, customers, suppliers, etc.)

6) identification and endorsement of those managers and firms that succeed in generating wealth while limiting its concentration and balancing interests of all stakeholders and not narrowly focusing on shareholders and management interests.

c. Alternative structures

1) support and protection for worker coops (i.e., companies formally based on democratic management)

2) increased use of credit unions

3) allowance for local complementary currencies

4) reforming campaign systems; public financing, limits on duration of campaigns, disallowing TV ads

5) support for public media (restoration of public ownership of public airwaves)

6) increased utilization of pension funds to finance projects, firms, management to strengthen local economy that is more independent of large ‘distant’ economic entities

Conclusion:

Corporations as a form of economic organization have been immensely successful in generating wealth – however, they have simultaneously been the indispensable engines for concentrating that wealth in fewer and fewer hands – the root cause of so many of the critical problems in our democracy, our society and the environment that we see all around us every day. The key to progress is to restore and defend a robust, energetic competition in our economy and our body politic.

SIDA believes that, as a society, we must put differences in perspective to have any hope of success in reaffirming our democracy in the face of the corporate and financial hegemony we have allowed to become rooted in our midst.

BIBLIOGRAPHY

  • “Dollarocracy”, John Nichols, Robert W. McChesney
  • “The Bankers’ New Clothes: What’s Wrong with Banking and What to Do about It”, Anat Admati and Martin Hellwig
  • “Cornered: The New Monopoly Capitalism and the Economics of Destruction”, Barry C. Lynn
  • “Money for Nothing: How CEOs and Boards are Bankrupting America”, John Gillespie and David Zweig
  • “Liquidated: An Ethnography of Wall Street”, Karen Ho
  • “The Modern Corporate State”, Arthur Selwyn Miller
  • “Twenty-three Things They Don’t Tell You About Capitalism”, Ha-Joon Chang
  • “Business Law” [textbook], Jane P. Mallor, et. Al.
  • “Taking the Risk Out of Democracy”, Alex Carey
  • “The Hidden Persuaders”, Vance Packard
  • “Bright-sided”, Barbara Ehrenreich
  • “The Wealth of Nations”, Adam Smith
  • “The Idea of Democracy”, ed., David Coop, et. Al
  • “The Next American Revolution”, The Penn Monthly, May, 1876 \
  • “For All the People: Uncovering the Hidden History of Cooperation, Cooperative Movements, and Communalism in America”, John Curl
  • “Unequal Protection: The Rise of Corporate Dominance and the Theft of Human Rights”, Thom Hartmann
  • “The Modern Corporation and American Political Thought; Law, Power and Ideology”, Scott R. Bowman
  • “The Gospel of Wealth”, Andrew Carnegie
  • “A Fierce Discontent: The Rise and Fall of the Progressive Movement in America”, Michael McGerr
  • “Banking and Currency and The Money Trust”, [1913] Charles A. Lindberg, Sr.
  • “Brandeis: Beyond Progressivism”, Phillipa Sturm
  • “The Bigness Complex: Industry, Labor and Government in the American Economy”
  • “For the Survival of Democracy: Franklin Roosevelt and the World Crisis of the 1930’s” , Alonzo L. Hamby
  • “The Road to Serfdom”, F.A. Hayek
  • “Capitalism and Freedom”, Milton Friedman
  • “Decade of Decision[1980’s]: The American System in Crisis”, Michael Harrington
  • “Defying Corporations, Defining Democracy: A Book of History and Strategy”, ed., Dean Ritz
  • “What Then Must We Do?”, Gar Alperovitz
  • “The Righteous Mind: Why Good People are Divided by Politics and Religion”, Jonathan Haidt
  • “The Undivided Past: Humanity Beyond Our Differences”, David Carradine

 

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